Spending on research and development (R&D) by UK businesses has stagnated since the EU referendum and needs a major boost to hit the Government’s target of 2.4% GDP by 2027, Manchester-based tax relief specialist Catax warns.

R&D spending in UK businesses has hovered at just 1.1% of GDP for more than 10 years despite the introduction of R&D tax credits designed to reward and encourage innovation in 2000. Earlier this year it emerged the UK ranked 11th in the EU for R&D spend as a share of GDP.

But the growth of R&D spending has slowed dramatically in real terms since the Brexit vote two years ago, down to just 3.3 per cent in 2016 then 2.9 per cent in 2017, compared to healthier annual growth of between five and six per cent in the preceding five years.

The latest figures released last month showed spending on R&D by UK businesses rose by £1.1 billion to £23.7 billion in 2017, a total increase of 4.9%. However, that only equates to 2.9% when inflation is factored in. This is the smallest increase, in real terms for several years.